Question 1

An IPO is not the only occasion on which newly issued stock is sold to the public.

Accepted Answer

A) True 
 B)False  True

Question 2

What are the functions of financial markets?

Accepted Answer

Financial markets help channel savings to corporate investment, and they help match up borrowers and lenders.They provide liquidity and diversification opportunities for investors.Trading in financial markets provides a wealth of useful information for the financial manager.

Question 3

Financial markets and intermediaries do not allow investors and businesses to reduce and reallocate risk.

Accepted Answer

A) True 
 B)False  False

Question 4

Which of the following information is not provided by the financial markets?

Accepted Answer

A) The price of six ounces of gold. 
B) The cost of borrowing $500,000 for five years. 
C) Microsoft's earnings in 2002. 
D) The cost of wiring one million yen to Japan. 
A) The price of six ounces of gold. 
B) The cost of borrowing $500,000 for five years. 
C) Microsoft's earnings in 2002. 
D) The cost of wiring one million yen to Japan.

Question 5

Which of the following financial markets is located in one, centralized location?

Accepted Answer

A) TSX. 
B) NASDAQ. 
C) Over-the-counter market. 
D) European Monetary Union. 
A) TSX. 
B) NASDAQ. 
C) Over-the-counter market. 
D) European Monetary Union.

Question 6

IPOs for smaller corporations are sold in secondary markets.

Accepted Answer

A) True 
 B)False

Question 7

Most trading in the shares of large Canadian corporations takes place on stock exchanges such as the Toronto Stock Exchange (TSX)

Accepted Answer

A) True 
 B)False

Question 8

Which of the following actions does not help to reduce risk?

Accepted Answer

A) Extending the service warranty for your notebook. 
B) Converting your money market account into a mutual fund account. 
C) Contracting to sell your farm produce to the neighborhood grocery. 
D) Buying Japanese yen now when you plan to study in Japan next year. 
A) Extending the service warranty for your notebook. 
B) Converting your money market account into a mutual fund account. 
C) Contracting to sell your farm produce to the neighborhood grocery. 
D) Buying Japanese yen now when you plan to study in Japan next year.

Question 9

The primary distinction between securities sold in the primary and secondary markets is the:

Accepted Answer

A) Riskiness of the securities. 
B) Price of the securities. 
C) Previous issuance of the securities. 
D) Profitability of the issuing corporation. 
A) Riskiness of the securities. 
B) Price of the securities. 
C) Previous issuance of the securities. 
D) Profitability of the issuing corporation.

Question 10

Provide five functions of financial markets and intermediaries

Accepted Answer

Transport cash across time; Ri

Question 11

A financial market is where securities are issued and traded.

Accepted Answer

A) True 
 B)False

Question 12

for the consumer, a credit card:

Accepted Answer

A) Transports money forward in time. 
B) Provides liquidity. 
C) Is a convenient way to pay? 
D) Is both (a) and (b) 
A) Transports money forward in time. 
B) Provides liquidity. 
C) Is a convenient way to pay? 
D) Is both (a) and (b)

Question 13

An IPO is an acronym that stands for:

Accepted Answer

A) Immediate Price Offering 
B) International Public Office 
C) Initial Price Order 
D) Initial Public Offering 
A) Immediate Price Offering 
B) International Public Office 
C) Initial Price Order 
D) Initial Public Offering

Question 14

As corporations grow, their requirements for outside capital can expand dramatically.

Accepted Answer

A) True 
 B)False

Question 15

The cost of capital for corporate investment is set by the rates of return on investment opportunities in financial markets.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is not typically considered a function of financial intermediaries?

Accepted Answer

A) Providing a payment mechanism 
B) Investing in real assets 
C) Accumulating funds from smaller investors 
D) Spreading, or pooling risk among individuals 
A) Providing a payment mechanism 
B) Investing in real assets 
C) Accumulating funds from smaller investors 
D) Spreading, or pooling risk among individuals

Question 17

A Seasoned Equity Offering refers to companies:

Accepted Answer

A) Offering new securities after their IPO 
B) Offering new securities each season 
C) Testing whether there is a market for the shares 
D) Delisting certain amount of their stock 
A) Offering new securities after their IPO 
B) Offering new securities each season 
C) Testing whether there is a market for the shares 
D) Delisting certain amount of their stock

Question 18

The opportunity cost of capital is generally not the interest rate that the firm pays on a loan from a bank or insurance company.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following financial intermediaries can loan money directly to businesses?

Accepted Answer

A) Mutual funds 
B) Pension funds 
C) Insurance companies 
D) Mutual funds, pension funds, and insurance companies. 
A) Mutual funds 
B) Pension funds 
C) Insurance companies 
D) Mutual funds, pension funds, and insurance companies.

Question 20

A capital investment that generates a 10 percent rate of return is worthwhile if:

Accepted Answer

A) Corporate bonds of similar risk offer 8 percent rates of return. 
B) Corporate bonds of similar risk offer 10 percent rates of return. 
C) top-quality corporate bonds offer 10 percent rates of return. 
D) The expected rate of return on the stock market is 12 percent. 
A) Corporate bonds of similar risk offer 8 percent rates of return. 
B) Corporate bonds of similar risk offer 10 percent rates of return. 
C) top-quality corporate bonds offer 10 percent rates of return. 
D) The expected rate of return on the stock market is 12 percent.

Exam 2: Financial Markets and Institutions

An IPO is not the only occasion on which newly issued stock is sold to the public.

What are the functions of financial markets?

Financial markets and intermediaries do not allow investors and businesses to reduce and reallocate risk.

Which of the following information is not provided by the financial markets?

Which of the following financial markets is located in one, centralized location?

IPOs for smaller corporations are sold in secondary markets.

Most trading in the shares of large Canadian corporations takes place on stock exchanges such as the Toronto Stock Exchange (TSX)

Which of the following actions does not help to reduce risk?

The primary distinction between securities sold in the primary and secondary markets is the:

Provide five functions of financial markets and intermediaries

A financial market is where securities are issued and traded.

for the consumer, a credit card:

An IPO is an acronym that stands for:

As corporations grow, their requirements for outside capital can expand dramatically.

The cost of capital for corporate investment is set by the rates of return on investment opportunities in financial markets.

Which of the following is not typically considered a function of financial intermediaries?

A Seasoned Equity Offering refers to companies:

The opportunity cost of capital is generally not the interest rate that the firm pays on a loan from a bank or insurance company.

Which of the following financial intermediaries can loan money directly to businesses?

A capital investment that generates a 10 percent rate of return is worthwhile if:

Goals and Governance of the Firm

Accounting and Finance

Measuring Corporate Performance

The Time Value of Money

Valuing Bonds

Valuing Stocks

Net Present Value and Other Investment Criteria

Using Discounted Cash-Flow Analysis to Make Investment Decisions

Project Analysis

Introduction to Risk, Return, and the Opportunity Cost of Capital

Risk, Return, and Capital Budgeting

The Weighted-Average Cost of Capital and Company Valuation

Introduction to Corporate Financing and Governance

Venture Capital, Ipos, and Seasoned Offerings

Debt Policy

Payout Policy

Long-Term Financial Planning

Short-Term Financial Planning

Working Capital Management

Mergers, Acquisitions, and Corporate Control

International Financial Management

Options

Risk Management

Conclusion

What We Do and Do Not Know About Finance

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